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Wednesday, 16 February 2011

Getting a 100% profit increase is easier than you think

There are only 3 ways to grow your business
1.       Increase your customer base
2.       Increase the value of each transaction
3.       Increase the frequency with which your customers buy from you
Most businesses think that doubling your turnover means having to double your customer numbers, but if you take each one of the 3 ways above, and start to apply some numbers; you get very interesting results.
What these results mean is that you can concentrate on smaller targets in each of the areas above, or even use a phased approach, improving one area after the other, to increase your turnover much more than you thought easily possible.
Let’s take a hypothetical business.  So you have a business, and in that business, let’s say you have 500 customers, and each of those customers spends an average of £10 per transaction and they buy from you at a frequency of let’s say 10 times a year, or week, or 2 years. The time frame really doesn’t matter.
500 x £10 x 10 = £50,000.
Let’s see what happens if we increase our customer base by just 10%, the value of each transaction by just 10% and the frequency by which those people buy, by just 10%.
550 x £11 x 11 = £66,550
That’s an increase of 33.1% and all you have done is make small improvements in the three main areas of growing your business
At this stage, don’t worry about how you will be able to make those improvements, stick with me, and I’ll give you everything you need.
How about this;
Again, using our hypothetical business, let’s see what happens if we increase our customer base by 30%, the value of each transaction by just 20% and the frequency by which those people buy, by just 30%. Slightly harder targets, but still very achievable over time. What happens to our numbers then?
650 x £12 x 13 = £101,400
That’s an increase of 102.8%. You will have doubled your turnover.
Now, you might be saying, that’s all very well but my business doesn’t work like that, I’m a roofer, newsagent, computer repair guy whatever, and I just can’t increase the frequency with which people buy, or my business doesn’t have regular customers, and how the hell do I raise my prices, and all this in a double dip scary economy  etc etc ?
I promise you that in the weeks and months to come, I will show you how you can influence these numbers no matter what business you are in.

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